Search

Editors

Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

Entries in International Oil Trading Cmpany (1)

Thursday
Oct232008

Overseas Bribery Allegations Against Florida Pol

A federal lawsuit filed in Miami this week alleges that Republican fundraiser Harry Sargeant III and his company made illegal payments to Jordanian officials in exchange for an exclusive license to move military fuel through Jordan and into Iraq, according to NBC News. If the allegations are true, the payments may have violated the Foreign Corrupt Practices Act.

Harry Sargeant is the Finance Chairman of the Republican Party of Florida. He and his firm, Boca Raton-based International Oil Trading Company (IOTC), deny wrongdoing and say no bribes were paid. A spokesman for them said the allegations in the lawsuit are a "sour-grapes effort by a losing bidder, an attempt to shake down IOTC for a job well done," according to NBC News' Aram Roston.

NBC News says the Miami lawsuit was filed by a competitor of IOTC, Supreme Fuels, based in Dubai. The central allegation is a "conspiracy since 2004 to bribe key Jordanian government officials to ensure that defendants would be the sole recipients of more than one billion dollars worth of U.S. government contracts for the supply of fuels to the U.S. military in Iraq."

The suit against Sargeant and his company reportedly asks for damages under the federal RICO statute -- the Racketeer Influenced and Corrupt Organizations Act. Victims of overseas public corruption cannot bring private lawsuits under the Foreign Corrupt Practices Act. Only the Justice Department and, for public companies and their personnel, the Securities and Exchange Commission, can prosecute FCPA offenses. IOTC is privately-held. (Earlier this year, unrelated private RICO suits alleging foreign bribery were brought against BP and Alcoa.)

Sargeant was the subject last week of a letter written by U.S. Rep. Henry Waxman (D-Ca), the Chairman of the Committee on Oversight and Government Reform. The letter asked Defense Secretary Gates to investigate Sargeant and IOTC in connection with overcharges for fuel deliveries to the U.S. military in Iraq. Concerning IOTC's arrangements with Jordan, Rep. Waxman's letter said,

When the Defense Department awarded IOTC the June 2004 contract, IOTC was the highest bidder of six offers, with an initial bid over twice as high as the lowest offer. None of the five lower bidders were awarded the contract, however, because they were unable to obtain a "letter of authorization" to transport fuel from the Jordanian government. As a March 2004 "Preaward Survey" reported, IOTC's "major strength is the backing of the Royal Family." In effect, this backing gave IOTC a monopoly on the delivery of fuel through Jordan. Mr. Sargeant and IOTC appear to have taken full advantage of their ties to the Jordanian royal family. Under federal procurement law, it is illegal to award a contract to a company whose prices are not "fair and reasonable."
The 16-page letter also said,
The contract awarded to IOTC in June 2004 was rebid in March 2005 and December 2006. In neither instance was IOTC the low bidder, but the contracts were awarded to IOTC because it remained the only bidder with a letter of authorization from the Jordanian government. In April 2005, Mr. Sargeant advised a contracting official that the letter of authorization awarded to IOTC "is a sensitive issue in Jordan and they would prefer to keep it as low profile as possible."
NBC News says it received an email from a spokesman for Sargeant saying that only a legitimate fee was paid to the government of Jordan. "What Supreme [Fuels] calls a 'bribe' was a required fee for importing and transporting military fuel through Jordan," a spokesman for Sargeant and IOTC said. "The fee was paid to an official agency of the Jordanian state and thoroughly documented. This and any other related charge have been shared with the Department of Defense (and to Congress) as part of our transparent disclosure of any and all costs related to the fuel delivery process."

Payments to government agencies do not violate the Foreign Corrupt Practices Act. But payments to government officials to obtain or retain business that are made directly, or indirectly through a government agency, can violate the FCPA.

As reported by the New York Times last week, Sargeant is listed on Senator McCain’s website as having raised $500,000 or more for his presidential campaign. The campaign had to return some of Sargeant's contributions because they were improperly "bundled"to avoid contribution limits. The donations in question were solicited by Sargeant's Jordanian business partner, Mustafa Abu Naba’a, and were all returned.

Another partner, Mohammad al-Saleh, a brother-in-law of Jordan's King Abdullah II, sued Sargeant in Florida state court last year. According to the New York Times, he alleged that he "obtained special governmental authorizations [for IOTC] to transport the fuel through Jordan and was then unlawfully forced out by Mr. Sargeant, who strongly disputed those allegations."

Rep. Waxman’s letter to Secretary Gates said Sargeant’s profit from the fuel delivery contracts may have been $70 million or more.

The New York Times pointed out that there is no evidence Senator McCain or anyone connected to his campaign tried to influence the granting of the contracts to IOTC.

.